Tuesday, May 05, 2009

Emerging Markets Hit 7-Month High

May 5 (Bloomberg) -- Emerging-market stocks rose for a fifth day, pushing the global benchmark index to a seven-month high, on speculation lower borrowing costs will quicken a recovery in economic growth and earnings.

The MSCI Emerging Markets Index climbed 0.8 percent to 706.37, bringing its five-day rally to 13%. Turkey’s ISE National 100 index led the advance in Europe, increasing 3 percent after the lowest inflation in 39 years bolstered expectations for more interest-rate cuts and lifted Akbank TAS. Philippine stocks posted the biggest gain in Asia as the country’s central bank said slower price increases will allow “increased flexibility” for monetary policy.MSCI’s benchmark index has surged 55% from a four-year low in October on signs the first global recession since World War II is easing as governments worldwide cut borrowing costs and increase spending. Shares of Asian exporters got a boost today from reports showing U.S. pending sales of existing homes and construction spending rose in March.

1 Comments:

Obama is clearing the market of excess real assets and goods through destruction (rather than consumption) of private goods. Part of the "stimulus" is the $400 tax cut, which went into effect April 1st. The tax cut isn't enough to reduce the oversupply of goods quickly. However, it's enough to place a trough in the recession. The destruction of private goods will be replaced with new public goods.

So, I expect a slow recovery and expansion. However, Obama has some positive factors going for him, including income redistribution increases consumption (since the poor has a higher marginal propensity to consume than the rich), the U.S. underproduced in the 2000s and will compensate in the 2010s (e.g. households will work longer to pay down debt and maintain autonomous consumption, which raise output and postpone retirements). Americans will work harder for fewer or smaller assets and goods. Yet, total output may increase at a faster rate through harder work.

From article:

"Just how soon will Americans start reaping the benefits of tax cuts? By April 1. The $400 credit for individuals is to be doled out through the rest of the year. Couples are slated to get up to $800. Most workers are to see about a $13 per week increase in their take-home pay."

Another article:

"President Barack Obama promised sternly on Monday to crack down on companies "that ship jobs overseas" and duck U.S. taxes with offshore havens. Obama said his plan would raise $210 billion over the next 10 years. Obama said the government is hiring nearly 800 new IRS agents to enforce the tax code."

Obama doesn't understand attacking corporations or the rich is also an attack on living standards or consumers. I stated before, U.S. corporations offshored high cost goods or goods with declining prices, imported those goods at lower prices and at high profits, and shifted those freed-up resources into high-quality "core" goods with market power.